EUROPE V. AMERICA ON CO2

December 20, 2006

Recent data show that the Kyoto Protocol hasn't done all that much to reduce emissions, and may even be counterproductive. And contrary to the caricature painted by proponents, the American approach may offer more, says the Wall Street Journal.

Consider:

CO2 emissions growth in the United States far outpaced members of the European Union (EU) from 1990-95 and especially from 1995-2000; in addition, the United States has outperformed the EU-15 since 2000, reducing emissions by 8 percent.

By comparison, the EU-15 saw an increase of 2.3 points, and only two EU states, Britain and Sweden, are on track to meet their Kyoto emissions commitments by 2010.

Six more might meet their targets if they approve and implement new, as yet unspecified, policies to restrict carbon output, while seven of the 15 will miss their goals.

Europe's dismal record is explained by its approach to reducing emissions, says the Journal. The centerpiece of the Continent's plan is a carbon-trading scheme in which companies in CO2-heavy industries receive tradable permits for a certain amount of emissions. If they emit more CO2, they must buy credits from firms that are under quota. The idea is to force companies to emit less CO2 by making it prohibitively expensive to keep the status quo.

All this scheme has done so far is provide further proof that government cannot replicate the wisdom of markets, says the Journal:

A red-faced European Commission recently admitted that it allowed more permits than there were emissions in 2005-07, keeping permit prices low and undermining the entire system.

When Brussels tried to make amends by ordering several member states to cut carbon permits by 7 percent more than expected for 2008-2012, industry and national capitals squealed.